How Health Systems Are Like Newspapers

“Hospitals are losing money on Medicare and Medicaid patients! They must charge commercial payers more to make up the difference!” is a much used argument to gouge consumers up to 1000 times more than what Medicare pays. Perhaps there are other contributing factors to hospital angst these days?

As a confessed congenital optimist, I’ll give my optimistic view of how positive developments are little-noticed, as they were with epic shifts that tore apart the newspaper industry (local digital media was where I spent much of my detour away from healthcare). Big orgs tend to demand our attention but it’s the smaller, but high growth, orgs who will ultimately overwhelm sclerotic orgs using sclerotic technology while disruptors use tech of this millenium/decade — with data frequently a core asset they know how to maximize its value.

Health system CEOs would be well advised to study what newspaper industry leaders did (or perhaps more appropriately, didn’t do) when faced with a dramatic industry change. Turn back the clock 15 years and the following dynamics were present (noting parallels w/ health systems):

Newspaper leaders knew full well that dramatic change was underway and even made some tactical investments. However they didn’t fundamentally rethink their model.

Newspapers were comfortable as monopoly or oligopoly businesses allowing for plodding decisions. Their IT infrastructure mirrored the plodding pace with expensive and rigid technology architectures.

Newspaper companies bought up other newspaper chains and took on huge debt.

Before they knew it, owning massive capital assets and the accompanying crushing debt became unsustainable. The capital barrier to entry transformed into a boat anchor while nimble competition dismissed as ankle-biters created a death-by-a-thousand-paper-cuts dynamic. Competitively, newspaper companies worried only about other media companies or even Microsoft, but their undoing was driven by a combination of craigslist, monster.com, cars.com, eBay, espn.com and countless other marketing substitutes for their advertisers. In addition, there were easier ways to get news than newspapers. Generally, the newspaper’s digital groups were either marginalized or unbearably shackled so that the encumbered digital leaders left to join more aggressive competitors. The enabling technology to reinvent local media didn’t come from legacy IT vendors who’d long sold to newspaper companies, but from “no name” technologies such as WordPress, Drupal and the like.

The parallels with health systems today are clear. Consider the present dynamics:

Health systems have been aggressively gobbling up other healthcare providers and frequently taking on debt to finance the growth. Concurrently, health systems often have capital project plans that equal their annual revenues even though no expert believes the answer to healthcare’s hyperinflation is building more buildings. Consider the duplicative $430 million being spent in San Diego to build two identical facilities just a few miles apart as Exhibit A of the problem. Studying other countries that shifted from a “sick care” to a “health care” system, more than half of their hospitals closed. They simply weren’t needed or weren’t appropriate.

Until recently, complex medical procedures always took place in an acute care hospital setting. Increasingly they are being done more and more in specialty facilities that can do a high volume of particular procedures at a significantly lower cost.

Just as newspapers were implementing multimillion dollar IT systems while nimble competitors were using low and no cost software to disrupt the local media landscape, health systems are similarly implementing complex (customizable but then rigid post-deployment) systems to automate the complexity necessary in a multi-faceted system. Meanwhile, disruptive innovators are implementing new models at a fraction of the cost and time. For example, it’s well understood that a healthy primary care system is the key to increasing the health of a population. Imagine if a fraction of the billions being spent by mission-driven, non-profit health systems on automating complexity was redirected towards the reinvigoration of primary care. They’d further their mission and lower their costs. Of course, they’d likely see revenues drop but presumably maximizing revenues isn’t the mission of a non-profit.

The plodding pace and scale of innovation at most health systems isn’t up to the enormity of the task. The vast majority of health system innovation teams are constrained by how they have to fit innovation into an existing infrastructure. That approach rarely, if ever, leads to breakthroughs, as its true intent is to make tweaks to a current system rather than a rethink from the ground up.

Death by a thousand papercuts undid newspapers. Likewise, there are an array of innovators carving out chunk by chunk of the healthcare pie. Just as it was easy to dismiss Google, Craiglist, ebay, Groupon, Foursquare, Facebook, etc. so too are the Iora Healths, Caremores, HealthCare Partners, Edison Health, One Medical, Surgery Center OK, Paladina Health, etc. but their value proposition is compelling. All of those players are deploying healthIT in a radically different way than incumbents. Those orgs and their supporting technology take it for granted that patients are a core member of the care team, have access to their data and generally are using IT for competitive advantage. As these orgs naturally become national scale, what seems like a local oligopoly that would be unchallenged forever are suddenly challenged by aggressive tech-enabled enterprises. For example, Edison Health should make every hospital realize that they are no longer just competing with local market competition. Incumbent health systems still have an opportunity to lead but the window is narrower than they believe.

This entry was posted on Tuesday, October 31st, 2017 at 9:08 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.
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